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The OS will initially be targeted to netbooks, then broadened to all PCs. It will be a combination of a Google Chrome browser and a Linux kernel. It will be a different project than Android. It will be designed to be simple and fast. It will also, presumably, be free.

A year of development is a long time, and it shows how complex an undertaking this will be. Announcing the product a year early is also a major break with Google tradition and shows how much Google needs help from partners in this endeavor to be successful. (An OS that is distributed only by downloads won't work. It needs to come loaded on the machine. This has been the big problem with Chrome so far, and Google needs to address it.)

Success is far from guaranteed. Google's browser initiative has been a fun little science project, but as a product it has been a flop. The same can be said for almost all of Google's non-search products. If Google wants to have a chance at success in this business, it needs to focus on it with the same intensity it once put into search. This will be challenging for Google, which for the last several years has had the luxury of dabbling in whatever it pleases.

Assuming the OS is free to both users and OEM PC makers, Microsoft will need to soup up the free version of its own Windows 7 OS for netbooks. Right now, Microsoft's plan is to ship a crappy free version of 7 and try to get users to upgrade. Eventually, if Google starts to gain traction, Microsoft may need to panic.

This is classic disruption. Disruptive technologies do not immediately replace existing technologies because they are better. In fact, in the beginning, they are worse. They're just simpler, cheaper and more convenient. They appeal to the low end of the market (in this case, netbooks), which doesn't need all the bells and whistles that the high end needs. They initially gain share in the low end, and the incumbent doesn't care about losing it because it's low-margin share. But then ... the disruptive products get better and more fully featured, and they begin to migrate up to the mid-market. And the incumbent is forced to retreat to the high-margin high end. And then, eventually, the disruptive product becomes mass-market and the incumbent becomes a rickety old colossus that crashes in on itself.

Microsoft needs to forget about competing with Google on search and start figuring out how to defend its crown jewels against this assault. It won't be easy. But blowing $10 billion going after a business they don't have to be in while ignoring the front-line invasion Google just launched will be disastrous.

Apple needs to worry too. Not as much as Microsoft, obviously. But Apple sells integrated hardware and software devices. And if free software begins to take over the world, that will increase the price advantage that Apple's competitors already have.

All of this is at least a year away. That's a decade in the technology business. But it will be the story of the year.